How to Help Your Child Find Financial Independence

Becoming an adult is hard for a number of reasons, but learning how to handle finances may be the most difficult part. Learning about finance is not something that is impressed upon in schools. Kids don’t learn about taxes, credit cards, or insurance policies during their upbringing unless their parents focus on it.

Consider teaching your kids how to handle their money. When your teen starts to drive, this becomes even more important.

Auto insurance for students can be expensive, but good grades and a clean driving record can make policies cheaper. We’ll discuss how students can improve their habits and save money on their car insurance deep into adulthood. We’ll also go over some of the other key financial problems young people face, like paying for college.

Keep Giving Teens an Allowance

One of the best ways to teach money management skills is through an allowance. Yes, even when you have a 16-year-old, giving them an allowance is helpful to create financial independence.

Most people associate an allowance with young kids, but the same lessons can continue to be taught in adolescence. If you have been giving your kid an allowance all their life, continuing during their teen years is even better. 

By now, teens will have started to understand the value of saving. Kids want to save on things like toys and games. Older children in their high school years are going to be thinking more ambitiously. Going to college, getting a car, and dating might be on their minds, and those things cost a lot of money.

Don’t just buy pay for these things in one lump sum for children. Giving them money little by little will teach them patience and financial habits.

If teens make a mistake with the money, it’s a tough lesson that needs to be learned. Making mistakes and figuring out how to recover from them is vital during adolescence.

Getting Good Auto Insurance

There is a lot of financial risk for teens who learn to drive. A lot of the expenses for high school students who drive have to do with insurance costs. Many companies charge more for teen and young adult drivers because they file more claims. Inexperienced drivers may make poor decisions behind the wheel.

Teens also are shown to text and drive four times more often than adults. This could lead to distracted driving, car accidents, and therefore increased insurance rates. There are ways for teens to show companies they are great drivers, though, like keeping a clean driving record.

If they get into an accident from speeding and their premiums go up, force your kids to pay for the difference with their allowance each month. This will encourage them to drive safer and do their own research on insurance questions like “how often do insurance companies check driving records?”

It will make them realize they need to be more careful behind the wheel. Their habits will improve, and it will help them as they develop into adults. Having a good driving record as a teenager can have a positive effect throughout life.

Talk About Post-Education Options

College is often the most expensive thing young people pay for. Help your student navigate the college search process. If universities are not in the cards because of their extreme expenses, talk about helping your child pay for community college.

Talk about other options for post-high school education. See if they want to go to a trade school, which is another cheaper option. Show them the difference between the costs of these routes compared to universities. It gives them more responsibility in deciding their future if they know the consequences of taking all types of different paths.

Maybe even encourage students to take a year off to save money for the school they want to attend. Jobs during gap years teach all kinds of skills, and it will allow them to learn the value of their money.

If high school students are working hard for the sake of paying for college, not just the sake of working, this motivates them. Some parents ask kids to work just because they think it’s the right thing to do or it’s a right of passage to adulthood.

Young people may not want to hear this. They need to see their efforts are practical. They want to know their parents are giving them tangible advice, not just forcing them to do something.

Let Young Adults Live at Home

A lot of young adults want to move out of their parents’ house as soon as possible. It shows everyone around them they are independent. The problem is housing is often too expensive to pay for in your 20s. Along with the tuition and car insurance payments, it’s very difficult to handle all of them.

Parents can offer to pay for housing for their adult kids as long as the kids are making progress toward financial freedom. High school and college students should be getting good grades and thinking about what career they want.

Continuing to pay for room and board for adult kids gives them the freedom to explore what they want in life. It’s a great compromise between kids and parents. You can gradually start to have kids pay for certain things around the house so they can get a feel for what it will be like when they move out.

Paying for Bills

Perhaps young adults can pay for the electricity bill. Maybe they can purchase dinner for themselves a couple of times a week. This sharing of the expenses is much better than trying to take it all on at once.

Teaching kids how to be financially independent is all about being familiar with money and its value. If you never make your kids pay for anything, this will keep them in the dark. If you force them to do it all on their own, this is overwhelming.

A good middle ground is a perfect area for them to operate in. They will learn about how to spend money effectively and become independent adults over many years. Nobody knows everything about finances. It’s a lifelong learning process.

About the Author:
Shawn Laib writes and researches for the auto insurance comparison site, 4AutoInsuranceQuote.com. He wants to help young people understand how they can better pay for auto expenses.